Who is more important – the partner who brings in the customers and manages the clients or the partner who does the back end operations?
I understand that they both are equally important to the success of a business but when it comes to sharing profit or deciding on a collaboration ratio – who should get more, by how much and why?
Will the ideal collaboration only be a “time & expense” reimbursement collaboration where both get reimbursed for their time & expenses they incurred and then they share the margin equally…How would you like to share your business and margin in such case?
Experienced Management Consultant
This is not as difficult a question as it seems. A very wise man, that I had the pleasure of working for, once told me something that changed my life…
“You don’t get what you’re worth. You get what you negotiate.”
Unfortunately, people continually compare themselves against others and worry about how their compensation stacks up against the other guy. They somehow take it as a given that the money they earn is directly tied to the value that they provide or their value as a person.
My wife worked in a job where she almost felt like she was robbing the company. She was making more money than she had ever made before and was incredibly happy. Then she found out the the slacker that sat next to her made 20% more than she did. Suddenly, the salary was unfair and she became a disgruntled employee. So what changed? Was she doing any more work? No. Was she making less money? No. Did her job change in any way? No.
So…what’s my point? There is no hard and fast rule for dividing up the revenues. I’ve seen account execs that work their butts off for 10% and they’re incredibly happy and wealthy. I’ve also seen lazy “do-nothing” reps that demand 60% or more and feel like they aren’t getting their share.
Personally, I think that the “hours” split is a silly one. If an AE can close a multi-million dollar deal in an hour and maintain it with a phone call per month, they provide the exact same value as the AE that has to sit on the account for hours per day. Similarly, a developer on the ground may work 80 hours a week, but piss off the customer with a bad attitude, miscommunication or broken code. You could use hours as a starting point (ie: “it would be reasonable to expect this to be a xxx hour commitment”) but I certainly wouldn’t use actuals.
My general rule of thumb is to simply ask each what their expectations are (hard dollars….not percentage of the pie), find a viable middle ground and try to keep 20-30% back for regular bonuses or for adjustments based on effort and complexity (difficult client that requires more hand-holding…excessive hours….etc.) . It’s more difficult when you’re one of the people in the mix. But you can still do it with customer satisfaction surveys or by just sitting down with folks at the table to discuss contributions. It’s funny how much more honest people will be about their contributions when they’re sitting across the table from one another trying to figure out how to divy up the money. It *does* require a certain amount of maturity in all parties. But if you have consulting professionals, that maturity is usually there (to some extent).